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 If the 80-year-old export credit-provider loses its operating
authority, its proponents argue that thousands of U.S. exporters
will suffer and that Washington will lose international economic
influence.
Its conservative Republican critics say private enterprise will fill
the funding gap, calling the bank a source of "crony capitalism" and
"corporate welfare" for big companies such as Boeing and General
Electric.
But smaller firms may be the biggest initial victims if the bank has
to stop operating.
Newport Beach, California-based Firm Green Inc, for example, fears
it may lose its second major Philippines green energy project in a
year to the uncertainty over Ex-Im's future.
After being beaten to a landfill gas deal last year by a South
Korean firm with export credit agency financing as Congress debated
the same issues, FirmGreen president Steve Wilburn said he is now
trying to persuade the developers of the Philippines' biggest-ever
solar power plant to stick with his Ex-Im-backed design and
construction proposal.
But he says time is running out to keep the $203 million,
100-megawatt project from going to China's Trina Solar Ltd as an
August construction launch date looms.
"We are promising that Ex-Im will be reauthorized and that financing
will be available," said Wilburn, whose firm has 11 employees and
contracts out its manufacturing work. "Foreign ECAs (export credit
agencies) and their supported manufacturers are champing at the bit
to feast on FirmGreen's bones."
The bank will have to stop lending and writing new trade guarantees
on June 30 if Congress fails to act. At least a short-term lapse in
its activities looks likely.
Wilburn's predicament is echoed by other small companies that use
Ex-Im financing, credit guarantees and insurance to extend their
reach into the global market. Trade bankers say they are likely to
be the hardest-hit by closure of the 80-year-old institution due to
a dearth of private-sector alternatives.
"There are no commercial banks in the U.S. that will make long-term
loans to African countries," said Richard Rogovin, chairman of U.S.
Bridge Corp.
Rogovin, whose 140-employee firm makes steel bridge kits in
Cambridge, Ohio, said some of his customers in Africa and South
America are now talking to Chinese, British and French manufacturers
that have unwavering support from their countries' trade banks.
"It's almost like the customers sense that this country is
withdrawing from international finance," he added.
Jeb Hensarling, chairman of the House Financial Services Committee
and Paul Ryan, chairman of the House Ways and Means committee, argue
that U.S. manufacturers will thrive more without Ex-Im bureaucrats
"picking winners and losers."
They dismiss exporters' concerns that foreign competitors and
aggressive export credit agencies will shove them aside.
"The argument that holds the least water with me is 'other countries
do it, so should we,'" Ryan said this month.
"GOOD THING" FOR CHINA
Zhao Changhui, the Export-Import Bank of China's chief country risk
analyst, said he would regret the possible demise of the bank's U.S.
counterpart, but that it would help China's competitiveness.
"With respect to competition in strategy and policies between the
U.S. and China, this is a good thing" for China, Zhao told reporters
at a forum in Yiwu.
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China's medium- and long-term official export credit support jumped
to $58 billion last year from $28.3 billion in 2011, according to a
recent U.S. Ex-Im report. It said U.S. support fell to $12.1 billion
from $21.4 billion over the same period.
Officials at Trina Solar, now the world's largest solar panel
manufacturer, declined to comment on the Ilagan solar project in the
Philippines. The project's local developer, a unit of Greenergy
Solutions Inc., also declined comment.
Trina has previously had support from the China Ex-Im bank,
disclosing in Securities and Exchange Commission filings that it
repaid a $40 million working capital loan from the bank last year.
It also repaid a $180 million China Development Bank loan.
Trade bankers say the U.S. Ex-Im's demise would leave a gap in trade
financing that would be hard for the private sector to fill, and a
freeze on new Ex-Im deals is already starting to take hold.
Much of the bank's financing activity is in the form of providing
credit guarantees for commercial bank loans, allowing it to maximize
export support while staying well under its total exposure cap of
$140 billion.
"The banks aren't able to bring on new customers essentially," said
Matthew Ekberg, vice president of international policy at the
Bankers Association for International Trade in Washington. "They're
just trying to get through the current transactions before June 30."
New capital rules implemented since the 2007/08 financial crisis
make it unattractive for many banks to make long-term loans on
infrastructure projects or aircraft in emerging markets because it
would tie up too much capital for too long, he said.
A senior trade banker at a major U.S. bank that does business with
ECAs around the world said there is often not enough risk appetite
to build loan syndicates in "difficult places" such as Africa
without a government guarantee.
Another frequent problem voiced by business owners is the reluctance
by banks to accept foreign purchase contracts as collateral for
working capital loans because of vetting and collection
difficulties.
Bankers say large firms such as Boeing are likely to find
alternative ways to finance their sales to wealthier countries such
as United Arab Emirates but could face problems in emerging markets.
Ex-Im says that while Boeing took up more than half the dollar value
of its support last year, more than 90 percent of its over 3,700
transactions were made with small businesses.
(Corrects paragraph 18 to change location where China Ex-Im bank
official spoke to Yiwu)
(Additional reporting by Krista Hughes in Washington, Brenda Goh in
Shanghai, Michael Martina in Beijing and Enrico Dela Cruz in Manila.
editing by Stuart Grudgings.)
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